Ofgem is the Office of Gas and Electricity Markets has said in a report that the energy price cap will increase from 1 April for approximately 22 million customers. Those on default tariffs paying by direct debit will see an increase of £693 from £1,277 to £1,971 per year (difference due to rounding). Prepayment customers will see an increase of £708 from £1,309 to £2,017.
The increase is driven by a record rise in global gas prices over the last 6 months, with wholesale prices quadrupling in the last year. It will affect default tariff customers who haven’t switched to a fixed deal and those who remain with their new supplier after their previous supplier exited the market.
Under the price cap mechanism, energy companies will be allowed to pass on these higher costs from April when the new level takes effect. This is because energy companies cannot afford to supply electricity and gas to their customers for less than they have paid for it.
Over the last year, 29 energy companies have exited the market or been put in special administration in the wake of soaring global gas prices, affecting around 4.3 million domestic customers.
Of the 680 businesses that were surveyed by UK Hospitality, a total of 93 per cent said they are planning to increase their taxes by an average of 11 per cent in the next few months.
Since lockdown, pubs, bars, restaurants and hotels have seen their overheads surge which began to lift last April. Due to shortages of both labour and goods, the cost of staff, food and drink, energy bills and insurance have risen.
Pritha Mukherjee, CEO and Founder, Posto/Kolkata Kitchen told Asian Voice, “The rise in energy prices is coming at a time which is inappropriate for the hospitality industry. Hospitality has been one of the worst-hit industries following the pandemic. In addition to energy prices, we are foreseeing an imminent rise in interest rates as well. This will make access to funding even more difficult as well. The rise in energy prices will not only impact the bottom line due to higher energy bills for the businesses, but it will also have a knock-on effect on the overall sales as our customers will now have lower disposable income to shell out on dining out or takeaways.”
Restaurateur and Chef Vivek Singh of Cinnamon Club told us, “Rising costs and increased uncertainty are not great news for restaurant businesses at the best of times, but coming out of a 2 year period of poor trading and accumulated costs/ rents (Covid-19) it could just be a knock out blow for many businesses. Most businesses anticipated a rise in food and drink costs and to some extent are preparing for them alongside VAT rises. However, rises in energy costs are difficult to factor in as there isn’t much clarity on its extent.”
Lord Karan Bilimoria, Founder Cobra Beer, told the BBC that the picture had become really challenging for firms and consumers.
"Our input costs in every way - bottling, energy - are up. Freight costs have soared, sometimes ten times. Wages are increasing and on top of that, there are labour shortages.
"It does mean that businesses have to put up prices. But the consumer is already feeling the squeeze. It is a really challenging situation for everyone," he said.
Alongside the £9.1 billion Energy Bills Rebate announced on 3 February, the government is providing £12 billion of support over this financial year and next to ease the cost of living pressures, with help targeted at working families, low-income households and the most vulnerable. The government said all households will receive £200 off their energy bills, and will then pay this “loan” back at a rate of £40 a year over five years from 2023.
